This article first appeared in The Edge Financial Daily, on February 2, 2016.

KUALA LUMPUR: Selangor State Development Corp (PKNS), the investment arm of the Selangor state government, is planning to list the waste management assets parked under its subsidiary Worldwide Holdings Bhd in the next three years, said its general manager Azlan Md Alifiah.

“We think we can monetise Worldwide’s waste management assets by going for listing, as we consider this to be one of our prime assets. Tapping into the capital markets is one of the options to create value for this asset. We are hoping it can be done in the next three to four years,” Azlan, 51, told The Edge Financial Daily in Shah Alam recently.

Azlan also said PKNS is not in a hurry to list the assets as it is waiting for the right time “to get the right valuation”.

“Now is definitely not the right time. What kind of valuation will we get if we go for a listing now? Hopefully, after three years, the market should recover and we will be ready to list the assets. I must also note that PKNS will not simply list any strategic asset, particularly [those with] land bank, as the benefit must go to the rakyat first,” he said.

Worldwide chief executive officer Datin Norazlina Zakaria, however, cautioned that the market often harbours a negative perception towards government-linked counters on Bursa Malaysia.

“The perception issue still lingers no matter how well the company performs. When PKNS delisted Worldwide, it was done at a steep discount to its net tangible asset of RM4.50 per share. Its share price was only hovering within the RM2 band,” shared Norazlina, who was formerly PKNS deputy general manager.

In 2007, PKNS privatised Worldwide — which has interests in property development and waste management — at RM3.90 per share.

Worldwide currently enjoys the monopoly of managing solid waste in Selangor. The group has a long-term concession to operate nine sanitary landfills, which can dispose of nearly 5,000 tonnes of waste daily.

Depending on waste types, Worldwide charges the state government a tipping fee that ranges from RM8 per tonne to RM55 per tonne.

According to documents filed with the Companies Commission of Malaysia, Worldwide’s waste management revenue for the financial year ended Dec 31, 2014 (FY14) was 18% higher at RM75.64 million, compared with RM64.09 million in FY13, on higher waste collection.

Worldwide’s FY14 waste management accounted for 23% of its total revenue of RM322.28 million that year, making it the second-largest revenue contributor. As at Dec 31, 2014, Worldwide’s waste management assets carried a net book value of RM30.6 million.

“Selangor generates the most rubbish in the Klang Valley. Land is getting scarce here and [in order] to prolong the capacity and lifespan of our land bank, we plan to build a waste-to-energy incinerator. If we continue with landfill activities, we may run out of land to dump the trash in seven years,” said Norazlina.

She added that Worldwide is ready to build the incinerator “whenever the state is ready”, but noted that it will require as much as RM1 billion in investment.

“If Worldwide can obtain feed-in-tariff approval, then we see building large-scale incinerators as a bankable project, as this will help reduce PKNS’ capital cost. At the same time, we can also maintain our tipping rate, which is among the more affordable ones compared with other agencies,” explained Norazlina.

According to the Sustainable Energy Development Authority Malaysia, the feed-in-tariff mechanism obliges energy utilities, particularly Tenaga Nasional Bhd, to buy renewable energy from producers at a mandated price.

Meanwhile, Azlan said PKNS is in the process of increasing its land bank by 60% or 6,000 acres (2,428ha) to some 16,000 acres by next year, as it seeks to boost its property development portfolio.

This follows PKNS’ disposal of some 213.5 acres of land in Kota Puteri, Selangor, to Worldwide for RM139 million last week, or RM15 per sq ft.

“Our land bank stands around 10,000 acres, and the gross development value (GDV) for existing projects is about RM6 billion. PKNS is finalising the development of Selangor Science Park 2, which has a GDV of RM12 billion. In total, that’s about RM18 billion in GDV, which will keep us busy beyond 2020,” Azlan added.

As for Worldwide, Norazlina said the purchase of PKNS land in Kota Puteri will increase its land bank to 490 acres from its 276.07 acres of land in Petaling Jaya, Klang and Kuala Selangor.

“We are in the process of acquiring another 300 acres in Rawang as we replenish our land bank and expand our development project across the state,” she said, adding that Worldwide has allocated RM400 million to increase its land bank.

Going forward, Azlan said PKNS is expanding its healthcare portfolio, and aims to finalise the acquisition of at least three private hospitals in Shah Alam, Gombak and Rawang by this year.

“The healthcare sector looks very promising and resilient. We are very new in this area, and we could not go organic. PKNS is talking to the owners to buy at least majority stakes in their holding companies,” he said.

Azlan said there is a new regulation that stipulates private hospitals must move their operations from shoplots to a stand-alone, purpose-built hospital.

“It is only a matter of time before they will have to abide by that. For us, we have the land bank, and the capability to build the hospital, while they have the expertise to operate the facility. It only makes sense that we go into this sector,” he added.